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Please note this article was originally published by the World Resources Institute: https://www.wri.org/insights/assessing-progress-ndcs

As countries prepare to gather at COP27 in Sharm el-Sheik, Egypt to advance the Paris Agreement on climate change, attention turns once again to its building blocks: countries’ 2030 climate commitments, known as nationally determined contributions (NDCs).

While the Paris Agreement established three global goals — limit global temperature rise to well below 2 degrees C (3.6 degrees F) and ideally 1.5 degrees C (2.7 degrees F), promote adaptation and resilience, and align financial flows with low-emissions, climate-resilient development — NDCs are the foundation. In its NDC, each of the Paris Agreement’s 194 Parties must lay out its aims to reduce emissions. Many also include plans for adapting to climate impacts and the financial requirements needed for implementation.

Countries must strengthen their NDCs on a regular, five-year cycle. Most submitted their initial commitments in 2015 and updated them by 2021. A new, stronger round of NDCs is due in 2025.

WRI’s Climate Watch platform tracks more than 200 indicators on all NDCs. The new State of NDCs report analyzed this data to draw out key trends and evaluate where the NDCs now stand. The key takeaway? Countries are making incremental progress on strengthening their NDCs, but what we really need to achieve the goals of the Paris Agreement is urgent transformational change.

Here’s what we know and what countries should keep in mind as they formulate new NDCs by 2025:

1) Despite some progress, countries must reduce emissions at least 6 times as much as current pledges.

The Intergovernmental Panel on Climate Change (IPCC) finds that global emissions must fall by at least 43% from 2019 levels by 2030 to align with the 1.5-degree C goal. By contrast, the current NDCs will only reduce global emissions by about 7% from 2019 levels. While this represents a 5.5 GtCO2e reduction compared to the initial NDCs — nearly equivalent to eliminating the annual emissions of the United States—countries will need to reduce emissions by 6 times as much to align with 1.5-degree C pathways.

While more countries have now set GHG reduction targets than in the initial NDCs and countries have expanded their targets to cover more sectors and types of greenhouse gases, the emissions impact of these improvements has been modest.  More than 85% of the improvement has come from large countries ratcheting up the stringency of their targets as opposed to adding new targets or expanding targets to cover new sectors and gases. Finding ways to accelerate ambition is paramount to the success of the Paris Agreement.

2) Countries are strengthening adaptation plans, but progress must speed up and expand.

In the current round of NDCs, countries nearly doubled the number of priority adaptation actions compared to their initial NDCs. These actions show improved coverage of sectors and systems for adaptation, with a strong focus on food and nutrition security, water and nature-based solutions. Current adaptation plans also include a stronger emphasis on equity than previous NDCs, with greater consideration of gender concerns and inclusion of Indigenous Peoples.

Yet more work needs to be done to implement adaptation at the speed and scale the climate crisis demands. Few countries’ NDCs include timeframes or indicators for implementation of adaptation plans, and less than half of current NDCs include adaptation monitoring, evaluation and learning, elements critical for ensuring that planned interventions translate into on-the-ground action.

3) Current levels of climate finance are insufficient for implementing even a subset of NDCs. 

While countries are not required to report their climate finance requirements in NDCs, 53% (89 countries representing 50% of the global population), all of which are developing countries, included an estimate for how much money they’ll need to implement their plans. These countries say they’ll need $4.3 trillion: $ 2.7 trillion for mitigation; $1.1 trillion for adaptation; and $475 billion unspecified.

Importantly, 51 countries’ stated needs amount to a total of $1.5 trillion to achieve their “conditional” NDC pledges, those contingent on receiving international finance to implement mitigation and adaptation plans. This figure dwarfs the promise by developed countries to provide $100 billion annually to developing countries by 2020 to support their climate actions — a target they’ve yet to meet. A new collective finance goal to go into effect after 2025 is currently under negotiation. Finance estimates from the 89 countries providing them underscore the need to mobilize significantly greater resources to implement NDCs.

4) Around 50% of developing countries include loss and damage in their NDCs.

Roughly the same number of countries refer to current or future costs of loss and damage — the consequences of climate change that go beyond what countries can adapt to — in their current NDCs compared to the first round. However, more countries are including information on loss and damage topics, such as slow-onset events, climate-induced migration, and provision of finance and capacity-building for loss and damage. This suggests that countries may prioritize elements of loss and damage even if they do not include cost figures in their NDC.

Additionally, Small Island Developing States (SIDS) are increasingly including loss and damage costs and related topics in their NDCs, suggesting that the most climate-vulnerable countries are prioritizing this information. Additional support for countries to analyze trends in loss and damage — including use of climate scenarios — and approaches for addressing it such as comprehensive risk management could improve this information in future rounds of NDCs.

5) 81% of NDCs seek to increase renewable energy, but few explicitly aim to reduce fossil fuel consumption.

In addition to economy-wide targets to reduce greenhouse gas emissions, most NDCs contain sector-specific measures. Those promoting renewable energy are among the most popular – 136 NDCs contain measures to boost renewable power, and more than half of these contain quantified renewable energy targets.

But limiting warming to 1.5 degrees C also requires slashing fossil fuel consumption dramatically, and far fewer NDCs explicitly address this. Only 51 contain measures pertaining to fossil fuel consumption, and a mere eight contain measures to phase out or phase down fossil fuel consumption.

6) Most NDCs include measures addressing forests and land use, but quality varies.

More than 140 NDCs contain measures to protect standing ecosystems, manage working lands to reduce emissions and/or restore degraded ecosystems. Seventy-eight NDCs contain measures in all three categories.

The quality of these measures, however, varies widely. Only just over half of NDCs have quantifiable targets related to land use and forestry, and very few incorporate critical measures such as financial needs and the rights of Indigenous Peoples and local communities.

7) NDCs prioritize electric mobility but don’t include other critical measures to reduce transport emissions.

A holistic approach to reducing emissions from transport includes avoiding unnecessary vehicle travel, shifting to efficient travel modes, and improving vehicle and fuel efficiency. The current NDCs have embraced vehicle improvements by promoting electric transport. Such measures more than doubled from the initial to the current NDCs.

The enthusiasm for electric mobility, however, was not matched by growth in other critical transport-related measures. Less than half of NDCs contain public transport measures. And active transport and low-carbon freight, shipping and aviation appear in only a handful of NDCs.

The next round of NDCs should ensure balanced attention to measures that avoid unnecessary travel, shift to sustainable travel modes, and improve vehicles, taking into account both passenger and freight sources.

(Learn more about transport in NDCs in WRI’s research paper, Sustainable Urban Mobility in the NDCs: The Essential Role of Public Transport.)

8) Only 15 of the 119 Global Methane Pledge signatories include a specific, quantified methane-reduction target in their NDCs.

Countries committed to the Global Methane Pledge, launched at COP26 in Glasgow in 2021, agreed to collectively reduce global methane emissions by 30% from 2020 levels by 2030. While around 80% of signatories include methane under the umbrella of their economy-wide GHG reduction targets, far fewer (only 15) include quantified methane-specific targets in their NDCs. This makes it challenging to determine how the collective Global Methane Pledge target will be met.

The next round of NDCs offers an opportunity for Global Methane Pledge signatories to spell out how they will contribute to the collective 30% reduction in methane emissions by 2030.

9) NDCs increasingly recognize the importance of a just transition.

As support for just transitions rise up the agenda for the UNFCCC, so too has its recognition in countries’ NDCs. The idea of a “just transition” is to reduce the negative impacts on workers, communities and value chains of transitioning to a zero-carbon economy while also ensuring that the benefits are fairly distributed.  Explicit attention to the idea in the initial NDCs was almost non-existent, only appearing in South Africa’s plan. In the current NDCs, 32 mention a just transition, although at varying depth. Some briefly mention the concept — such as Mauritius and Iceland — while other parties —such as South Africa, Antigua and Barbuda — have more fully incorporated the concept, with paragraphs or dedicated sections on just transition. The next round of NDCs, in addition to national policies, can spell out these efforts more fully.

What’s Next for Countries’ Nationally Determined Contributions (NDCs)?

As agreed at COP26 in Glasgow, countries are expected to continue strengthening their NDCs this year. But in the lead-up to COP27, progress appears to have reached a plateau.

As countries develop new plans in advance of 2025, it will be important to deliver not just incrementally more ambition, but an entirely different scale of ambition and a clear sense of the transformations countries will pursue.

September 12, 2022 – Supply Change (SC), a non-profit initiative of Forest Trends, has published a two-part series explores corporate progress on their sustainability commitments and supply chain management since 2020. The latest publication, Corporate Implementation, Impacts, and Reporting on No-Deforestation & “Nature Positive” Post 2020, offers a comprehensive evaluation of 125 leading consumer brands and retailers’ efforts to end commodity driven deforestation in the production or supply of forest-risk commodities including cattle, cocoa, palm oil, soy, timber, paper and pulp. 

About Supply Change: Forest Trends’ Supply Change Initiative draws from publicly available data to track a global set of companies, representing all levels of the supply chain from producers to retailers, and their commitments to address commodity-driven deforestation. SC compiles all research in a sophisticated database management system of over 900 companies that enables the generation of insights within cattle, cocoa, palm oil, soy, timber, paper and pulp supply chains. 

Over the next five years (2022–2027), SC will publish corporate and investor-tailored reports annually, summarizing key trends in the commitments, implementation and impacts of companies’ sustainable commodity commitments. They will identify trends in corporate sustainability commitments within key forest-risk supply chains that are emerging post-2020 and in addition to providing this “state of corporate deforestation commitments”, they will offer actionable information to enhance sustainable practices in corporate portfolios and mitigate potential reputational, operational, and market risks. 

Part one focused on corporate commitments and policies. In Part 1, Corporate Progress on No Deforestation and “Nature Positive” Post 2020, SC found that most companies had time-bound commitments to reduce forest loss, but many did not have sufficient systems to implement their commitments, including comprehensive risk assessment processes and greenhouse gas (GHG) emissions measurement and mitigation strategies that included Scope 3 emissions.  

Despite maintaining a commitment for at least one forest-risk commodity, many commitments did not cover companies’ entire supply chains, and SC noted recurring issues with commodity coverage and the level of detail provided by companies. Overall, SC found that companies are working to understand and minimize the impacts of their commodity production and sourcing, but many are still falling short on key facets of sustainability reporting. 

Part two focuses on implementation, impacts and progress towards achieving commitments. In the second part of this two-part series, Corporate Implementation, Impacts, and Reporting on No-Deforestation & “Nature Positive” Post 2020,  SC builds on its previous findings to assess trends in the approaches used by companies to implement and disclose progress on their commitments. Trends discussed include companies’ approaches to monitoring, traceability, risk management, supplier engagement, progress reporting, and GHG emissions reporting. This report also highlights the implications of these trends and where there are opportunities for investors to encourage companies in their portfolios to adopt best practices for effective implementation and reporting.   

Above all, this reporting demonstrates that urgent action is needed to overcome persistent barriers to drive progress in fulfilling corporate sustainability commitments in forest-risk supply chains. Both companies and investors will have a pivotal role in the next five years in driving transformational change towards eliminating commodity-driven deforestation, reducing greenhouse gas emissions, and protecting human rights throughout their supply chains. 

For more information, please contact [email protected] 

10 August 2022 | Blue carbon and its many benefits are popular topics in discussions about how to address climate change. Many types of blue carbon projects hold tremendous potential for sequestering carbon and protecting their ecosystems, but they are not yet established, which has opened some debate about how impactful blue carbon can be in sequestering greenhouse gases at the scale we need.

There is, however, one type of blue carbon offset project that can be accurately, reliably and transparently measured in terms of emissions reductions. And it is critical for supporting local ecosystems and communities. It’s mangrove forests. This summer the Climate Action Reserve registered the first-ever mangrove forest project in Mexico, marking a significant milestone in demonstrating the impact and feasibility of this type of project.

To understand what this offset project type is and the value it brings, let’s look at the basics.

Mangrove forests are unique and distinct. They are found around tropical and subtropical shorelines and thrive in those salty waters, where other trees cannot survive. Their thick prop roots are twisted and complex, making them appear to stand above the water. Their roots also slow down water flow and allow sediment to collect. Because of these characteristics, mangrove forests are natural protectors and providers. They stabilize coastlines, reduce erosion and provide critical habitat for organisms.

Mangrove forests are critical to addressing climate change because they are excellent at storing carbon. In fact, mangrove forests are among the most carbon-dense ecosystems and can sequester four times more carbon than rainforests. Much of the carbon is stored in the soil collected beneath the mangrove trees.

Additionally, mangrove forests are critical for protecting against the current impacts of climate change by stabilizing coastlines and reducing erosion from storms, currents and tides.

Unfortunately, numerous issues are facing the world’s critical mangrove forests. The American Museum of Natural History (AMNH) describes mangroves as “among the most threatened habitats in the world.” Less than 50 percent of the world’s mangrove forests were intact at the end of the 20^th century, and of those that remain, half are in poor condition.

Forces threatening mangrove forests include:

• The conversion of wetland areas to artificial ponds by the aquaculture industry. Water is diverted away from the mangrove forests and waters are contaminated by chemicals, antibiotics and organic waste.
• The conversion and destruction of mangrove forests for agricultural use.
• The displacement of and damage to mangrove forests for coastal development of ports, docks, buildings, golf courses and marinas.
• The logging of mangrove forests by charcoal and lumber industries.
• Extreme weather, warmer air and water temperatures, increasing variability and intensity of rainfall, ocean salinity and other impacts caused by climate change.
• Irresponsible tourism.

The Climate Action Reserve is working to protect and restore these unique ecosystems. The organization recently registered the first-ever mangrove forest offset project in Mexico. The Manglares San Crisanto/San Crisanto Mangroves project, which was registered under the Reserve’s Mexico Forest Protocol v1.5, is the first of its kind in Mexico. It includes three reporting periods, and an estimated 47,908 tonnes CO2 have been removed by the project.

The Reserve’s Mexico Forest Protocol encourages the protection, improved management and restoration of mangrove forests through the issuance of offset credits for additional emissions sequestration activities above the baseline. Communities following the protocol receive economic incentives and resources to ensure that these coastal ecosystems provide greater benefits for surrounding communities and biodiversity, build greater resilience to the impacts of climate change and store more carbon to benefit the global climate.

As the first project of its kind in Mexico and also the first mangrove project registered with the Reserve, the San Crisanto Mangroves project is pioneering and demonstrates the ability of mangrove forests to become viable offset projects and support local communities.

For the San Crisanto community, the mangrove forest is central to the ejido (land managed communally) and the community members’ way of life, which is deeply connected to the mangroves through fishing, coconut plantation, salt production, protection of native animals and sustainable tourism. Prior to developing the project, the community had lost water flow to the mangrove forest, which resulted in the loss of fish, birds and biodiversity and the area was immensely deteriorated. While developing the project, the community recognized the importance of the mangrove forest to their existence. Their offset project provides them with continuity to their way of life.

According to Jose Ines Loria Palma, President of Fundación San Crisanto, the San Crisanto Mangroves project taught the community many lessons, including:

• You have to take a proactive attitude towards life, not wait
• You must have a very long-term sustainable development project
• It is very important to learn and teach to respect nature
• Capacity development is a very important success factor
• Carbon and biodiversity are not merchandise; what is paid for is the preservation of life

August 11, 2022.   This  article was originally published on americancarbonregistry.org

LITTLE ROCK, Ark., May 30, 2022 – The American Carbon Registry (ACR), a nonprofit enterprise of Winrock International, has announced updated program rules, effective immediately, that prohibit the tokenization of ACR carbon offset credits unless explicitly authorized by ACR. The updated rules, detailed in the legal Terms of Use agreement with ACR account holders, are designed to protect carbon asset integrity, including by ensuring that ACR-issued credits are not double sold or used by more than one entity to make environmental claims.

Concerns about blockchain’s role in the carbon markets has been amplified in the recent months amid the swift emergence of a crypto carbon market, in which millions of carbon credits have been retired, tokenized and converted to cryptocurrencies.

“Over the course of the last year, we have been in discussions with a number of companies interested in utilizing a range of technologies to streamline the credit creation process as well as to create digital carbon assets such as tokens and carbon-backed cryptocurrencies. While interested in the opportunities that these and other digital technologies offer to create efficiencies in carbon measurement, monitoring, reporting and verification, and to democratize access to markets, we are committed to a rigorous assessment process to ensure that they don’t undermine the foundations of carbon market integrity,” said Mary Grady, the Executive Director of ACR.

“As things stand at the moment, we believe the new link between carbon markets and unregulated cryptocurrencies presents a reputational vulnerability that could jeopardize confidence in carbon markets at precisely the time we need scale and transparency for markets to help achieve Paris Agreement climate targets,” Grady added.

ACR’s newly announced rules are the first step in the development of a set of program guardrails to protect market integrity. Alongside its own efforts to understand the risks and opportunities, as well as what rules would need to be in place for the creation of digital carbon assets, ACR has participated in the International Emissions Trading Association (IETA) Council Task Group on Integrity in Digital Climate Markets, launched earlier this year, which seeks to ensure sound foundations for the integration of carbon markets with digital technologies. The task group has already issued a set of principles to ensure integrity in digital carbon market offerings.

Over the coming months, ACR will build on the IETA principles and collaborate with carbon market participants with the aim of establishing a common implementation roadmap to safeguard the structural, legal and environmental underpinnings of carbon markets, while optimizing climate impact and access to finance. This will include program rules to authorize the tokenization of credits; developing the required registry infrastructure to ensure transparency and avoid double selling and double claims; and the implementation of appropriate legal and regulatory considerations along the carbon value chain.

10 August 2022 | With the passage of the Energy Conservation (Amendment) Bill, 2022, the domestic carbon market is becoming a reality. However, this also brings in many question marks. The statement from the Hon’ble minister regarding restrictions on the export of carbon credits will be the major focal point in the planned launch of India’s carbon market.

There are few of the areas we must need to look into i.e, first as the Energy Conservation (Amendment) Bill, 2022 intends to bring in the energy segment under the carbon market, it appears that the export ban of carbon credit may be immediately impacting the credits generated from the renewable energy sector; many of which are of low-hanging fruits. Projects under the renewable energy segment, including wind and solar, may cease generating any carbon credits post-2020. The authority may propose a new framework which will make many of the existing low-hanging RE projects ineligible under the domestic carbon market. If permitted, it will immensely impact the sustainability of credits from PAT and REC, considering the current ambition of integrating PAT and REC under a new carbon market framework. Today in India, the demand for carbon credit from the voluntary market segment is very limited, and any policy flexibility of allowing low-hanging carbon credits at par withPAT and REC under the existing market segment; will pull the price of REC and ESCerts (Energy Saving Certificates) down. Thus, the policy framework should need to distinguish the credits from the different segments and create a pathway to integrate all the credits with a timeline of 5 to 10 years. Unless the proposed future carbon market framework is not flexible in accommodating voluntary carbon market standards, many projects under the voluntary carbon market standard will cease to exist. Thus, a significant testing phase will happen during the next few months to test the market’s fair, credibility and sustainability.

The second is on credits generated from forestry, waste management and transport sectors. Although the proposed bill limits renewable energy and energy efficiency sectors , it is clear that other sectors may need to pass through the same test of export ban considering India’s updated NDC targets reduction of emissions intensity of GDP by 45 per cent by 2030, compared to 2005 levels. These issues will be assessed during the next few months under the corresponding adjustment. The testing phase is how these sectors will be accommodated in the new future and under what provision.

The third point is what will be defined as a carbon credit in the context of India. As per the bill, “carbon credit certificate” means the certificate issued by the Central Government or any agency authorised by it under section 14AA. With the emergence of many voluntary carbon market standards and players and overnight new players declaring a new standard/platform/registry, it will be a critical phase to redraw the eligibility criteria for defining carbon credit certificates. The carbon market has failed due to credibility issues despite its novel intention, and thus the foundation of India’s carbon market has to be based on credible carbon credits. With Article 6.4 becoming the front runner in kick-starting the carbon market under Paris Agreement in the near future, and many of the CDM components may be the choice during this transition, India’s carbon market framework will also closely follow the safest pathway in following the multilateral framework and guideline aligning with A6.4.

The final point is that the message on the export ban of carbon credits may not have been intended for sectors where large investment is needed through carbon financing. However, the generalisation of the export ban statement in its spirit may hamper India’s current stature as one of the preferred investment destinations for the realisation of quality carbon credits. With billions of Dollars of investment commitment to qualitative and impact carbon (where government incentives are hardly present), the government should try to bring much clarity to these sectors. Today there is immense demand for community-led and nature-based solutions where the private sector and communities with investment from impact funds aim to reduce tremendous greenhouse gas emissions. Many of these sectors, such as cookstove or soil carbon in the agriculture sector, are immensely thriving and changing the rural landscape and ecosystems. Although the current bill doesn’t have any provision to limit the existence of carbon credits, there is an immense threat if we should not bring in a very detailed and consistent policy framework during the course work of the drafting of the carbon market framework. And we should not generalise the carbon credits for each sector as one. We must note that there is not much demand in India for quality carbon credits considering small players who will offset their carbon emissions. Thus, we should facilitate a supportive policy framework in the sectors where government intervention and engagements are minimal, which will help large investment flow for mitigating GHG emissions from these sectors.

Ecosystem Marketplace has recently signed a three-year agreement with Forest Stewardship Council (FSCGD GmbH) to collaborate and develop shared insights regarding carbon markets and non-carbon benefits as they pertain to FSC certified forests.  For more than 25 years FSC has pioneered forest certification and promoted responsible management of the world’s forests. Through this collaboration FSC seeks to connect FSC-certified forest managers with new markets, help project managers market FSC benefits and enable carbon markets to drive value to FSC certified forests.  Ecosystem Marketplace has tracked global carbon market transactions and associated benefits “beyond carbon” for more than 16 years.  Transaction attributes that EM tracks include co-benefit standards such as Climate, Community and Biodiversity (CCB) and project assessments of Sustainable Development Goals.

The shared workplan includes publishing a brief discussion paper focusing on non-carbon benefits of forest carbon projects and the overlap with FSC certified forests.  Research will pull from carbon markets data that EM collects, FSC certified projects, public data sets such as international carbon standard registries, and structured interviews with forestry project managers. The work will begin by cross mapping FSC certified forests with carbon market data that EM has compiled for forestry projects, specifically Improved Forestry Management projects, in order to identify the subset of forestry projects on which the analysis will focus.

The first discussion paper will be published pre-COP27 in Egypt in November and accompanied by a webinar presentation.  EM and FSC also hope to collaborate on side events focused on land use and the voluntary carbon market at the Forestry Pavilion at COP27.

If interested, or to learn more  about this collaboration, contact [email protected] or [email protected]

This article first appeared on Biofilica

15 June 2022 | A new Federal decree puts Brazil on route to capture an important share of the voluntary carbon market that is expected to grow at least tenfold by 2030¹ and helps to understand the executive branch’s strategy of what may turn out to be a Brazilian ETS².

In a pompous event held at the Botanical Garden in Rio de Janeiro and attended by the President, his Ministers of Economy, Environment, Foreign Affairs, Mines and Energy, with the presidents of the Central Bank, Bank of Brazil, Petrobrás, as well as dozens of CEOs and entrepreneurs of companies linked to the energy sectors, agriculture and environmental markets, the Federal Government announced a series of measures to increase Brazilian competitiveness in businesses related to decarbonization and so-called Green Investments. Undoubtedly, the most important was Decree 11,075, which established procedures for sectoral agreements for greenhouse gas (GHG) mitigation, in addition to establishing the National System for Reducing Greenhouse Gas Emissions, entitled SINARE.

A 13-year long journey

The legal basis of the decree dates back to 2009, when the National Climate Change Policy (PNMC, in Portuguese) was established by law. It is in the PNMC that the idea of sectoral agreements for GHG mitigation originates, targeting, for example, the energy, agriculture and transport sectors; it also introduced the concept of the Brazilian Market for Emission Reduction, a green and yellow ETS.

Unfortunately, after 13 years of the PNMC, we have not yet established sectoral plans and it was only until recently that we begun to see significant advances in the business environment for the development of voluntary carbon markets in Brazil, with the establishment of the Forest + Carbon Program (2020), and the National Payment Policy for Environmental Services (law 14,119) of 2021.

This pro-market direction is essential for Brazil to capture a share consistent with our competitive advantages, bringing here, via carbon markets, a necessary financing for a decarbonization route, especially in activities related to land use such as within agriculture and forest management.

This decree is only the long-awaited kick-start, as there is still a long regulatory path to address complex technical issues and legal gaps that still need to be clarified, such as the legal nature of the carbon credits, and adopted, such as the Socio-Environmental Safeguards for registration in the SINARE. Some market analysts and lawyers linked to the topic suggest that some of these gaps should be filled in the form of law, currently debated in Congress under law proposal 528/21³. Such complementary initiatives should be followed in parallel with other pricing mechanisms established by law, a fact widely recognized in Article 6 the Paris Agreement.

In any case, it is evident that the political signal of the path chosen by Brazil in relation to the financing of activities related to decarbonization, is one of more markets and less taxes. This approach is also in line with the recently published World Bank carbon pricing report, which shows that worldwide in 2021, the collected total via a carbon market was around US$ 56 billion, while in tax regimes the amount stood at US$ 28 billion. Emphasizing that in the case of markets, this is only the value of primary transactions (purchase of allowances⁴ + first sale in the voluntary market), that is, it does not include the secondary market that is estimated to be in the magnitude of US$ 754 billion.

What does the voluntary market have to do with all this?

The voluntary carbon market serves to increase the climate ambition of various actors, such as companies committed to Net Zero paths, while financing activities that are not yet financially viable, such as forest restoration and conservation. Numerous market analyses and reports⁵ indicate a growth between 15 and 20 times in the next 10 years. McKinsey estimates a market value of around $50 billion by 2030. Last year alone, more than 110 GHG sequestration and reduction initiatives funded by this market were launched only in  Verra’s Verified Carbon Standard (VCS).

Seeking a slice of this global funding cake is the obligation of any government that is seriously committed to sustainable development in Brazil. In this sense, instituting SINARE, observed by the need to define Social and Environmental Safeguards, represents a major advance and deserves to be celebrated. This mechanism has been a longstanding demand by project developers, including Biofílica. The expectation is that this central and digital registry will serve as a kind of “filter”, allowing only the registration of high integrity, socio-environmentally sound programs and projects, with real climatic benefits. This only strengthens the quality of “Made in Brazil” credits and makes us even more competitive to receive financing via carbon markets. Export.

It is also possible to imagine that within a five-year horizon, credits registered within the SINARE can access demand from regulated companies in Brazil that will need to achieve their sectoral goals. Domestic sale.

Portuguese version see below:

Decreto do Governo Federal coloca o Brasil na rota de capturar uma importante fatia do mercado voluntário de carbono que deve crescer pelo menos dez vezes até 2030¹ e ajuda a entender a estratégia do executivo do que pode vir a ser um ETS² Brasileiro.

Em um evento pomposo realizado no Jardim Botânico do Rio de Janeiro e que contou com a presença do presidente da República, seus ministros da Economia, Meio Ambiente, Relações Exteriores, Minas e Energia, com os presidentes do Banco Central, do Banco do Brasil, da Petrobrás, além de dezenas de CEOs e Empreendedores de empresas ligadas aos setores de energia, agropecuária e mercados ambientais, o Governo Federal anunciou uma série de medidas para aumentar a competitividade brasileira em negócios ligados à Descarbonização e aos chamados Investimentos Verdes. Sem dúvida, o mais importante foi o decreto 11.075 que estabelece procedimentos para acordos setoriais de mitigação de Gases de Efeito Estufa (GEE), além de instituir o Sistema Nacional de Redução de Emissões de Gases de Efeito Estufa, intitulado de SINARE.

13 anos de trajetória

A base jurídica do decreto é de 2009, quando foi estabelecida por lei a Política Nacional de Mudança do Clima (PNMC). É na PNMC que surge a ideia dos acordos setoriais para mitigação de GEE, incluindo por exemplo os setores de energia, de agricultura e transporte; além de introduzir o conceito do Mercado Brasileiro de Redução de Emissões, o ETS verde e amarelo.

Infelizmente já passados 13 anos da PNMC ainda não temos estabelecido os planos setoriais e muito recentemente começamos a ver avanços expressivos nas condições de negócios (“business environment”) para o desenvolvimento dos mercados voluntários de carbono no país, com o estabelecimento do Programa Floresta+ Carbono (2020), e da Política Nacional de Pagamento por Serviços Ambientais (lei 14.119) de 2021.

Esse direcionamento pró mercado é essencial para que o Brasil possa capturar uma fatia condizente com nossas vantagens competitivas, trazendo para cá, via mercados de carbono, financiamento mais do que necessário para uma rota de descarbonização, principalmente em atividades ligadas ao uso da terra como agropecuária e florestas.

Esse decreto é apenas o tão esperado pontapé inicial, afinal resta ainda um longo caminho regulatório para endereçar questões técnicas complexas e lacunas jurídicas que ainda precisam ser esclarecidas, como da própria natureza jurídica dos créditos, e adotadas, como por exemplo as Salvaguardas Socioambientais para registro no SINARE. Alguns analistas de mercado e advogados ligados ao tema sugerem que parte dessas lacunas deveriam ser preenchidas em formato de Lei, hoje debatidas no Congresso sob o PL 528/21³.Iniciativas complementares que devem seguir em paralelo a outros mecanismos de precificação estabelecidos por Lei, fato amplamente reconhecido no artigo 6 do Acordo de Paris.

De qualquer maneira fica evidente a sinalização política do caminho escolhido pelo país em relação ao financiamento de atividades ligadas à descarbonização, mais mercados e menos impostos. Muito em linha com o recém-publicado relatório do Banco Mundial sobre Precificação de Carbono, que mostra que mundialmente em 2021 o total arrecadado via mercado de carbono foi da ordem de US$ 56 bi, enquanto nos regimes de impostos (tax) o valor ficou em US$ 28 bi. Enfatizando que no caso dos mercados, esse é apenas o valor das transações primárias (compra de allowances⁴+ primeira venda no Voluntário), ou seja, não inclui o mercado secundário que pode ser na ordem de US$ 754 bi.

E o mercado voluntário com isso?

O mercado voluntário de carbono serve para aumentar a ambição climática de diversos atores, como empresas comprometidas com o Net Zero, e ao mesmo tempo financiar atividades ainda sem viabilidade financeira, como restauração e conservação florestal. Inúmeras análises e reportes de mercado⁵ indicam um crescimento entre 15 à 20 vezes nos próximos 10 anos. A Mckinsey estima um valor de mercado da ordem de US$ 50 bi em 2030. Só no ano passado, foram lançadas mais de 110 iniciativas de sequestro e redução de GEE financiadas por esse mercado somente no padrão Verified Carbon Standard (VCS) do Verra.

Buscar uma fatia desse bolo global de financiamento é obrigação de qualquer governo comprometido seriamente com o desenvolvimento sustentável no Brasil. Nesse sentido, a instituição do SINARE, observada à necessidade da definição de Salvaguardas Socioambientais, é um grande avanço, pleito antigo das empresas desenvolvedoras de projetos como a Biofílica, e merece ser celebrado. A expectativa é que essa central única e digital sirva como uma espécie de “filtro”, permitindo somente o registro de programas e projetos socioambientalmente íntegros, com benefícios climáticos reais. Isso só fortalece os créditos “Made in Brazil” e nos deixa ainda mais competitivos para receber financiamento via mercados de carbono. Exportação.

É também possível imaginar que em um horizonte de cinco anos os créditos registrados dentro do Sinare possam acessar demanda de empresas reguladas no Brasil que precisarão atingir suas metas setoriais. Venda doméstica.

This article first appeared on Greenfact.

09 June 2022 | The RE100 launched a public consultation on three proposed changes to its technical criteria following town hall meetings it held with members in February 2022.

The consultation proposes the following three key changes:

1. Make AIB membership the market boundary for Europe
2. Accept physical cross-market procurement when certain conditions are met
3. Introducing a 15-year limit on commissioning dates which RE100 members may claim purchased (not-self generated) renewable electricity from.

A glimpse into the RE100

RE100 is a global initiative led by The Climate Group in partnership with the CDP to drive change towards zero-carbon grids at scale. The initiative consists of large and influential firms aiming for 100% renewable electricity. According to the initiative for a company to be considered 100% renewable it “must procure or self-produce 100% of its electricity throughout its entire operations from renewable sources.”

On the path to achieving 100% renewable electricity consumption RE100 companies may use the following two methods of procurement:

• Self-production and use of renewable electricity. These self-owned production devices can be grid-connected either onsite or offsite or they can be entirely off the grid.
• Procured renewable electricity sourced from producers and suppliers in the market. This includes Power Purchase Agreements, retail purchases from utilities and the procurement of unbundled Energy Attribute Certificates (EACs).

Proposed changes to the RE100 Technical criteria

The RE100’s technical criteria outline the renewable energy sourcing options available to companies that participate in the RE100 campaign while defining what counts as renewable electricity. The criteria are set by the RE100 Technical Advisory Group in consultation with member corporations and with the approval of the RE100 Project Board.

Considering that the renewable energy market is an everchanging landscape revisions are made to the technical criteria every two years in March. The next planned update will be published in March 2023.

Making AIB membership the market boundary for Europe

The RE100 requires its members to procure renewable electricity from the same markets in which they operate and most markets are defined by national geographic boundaries. However, Europe and North America have been regarded as exceptions due to having single markets for electricity trading.

Regarding Europe specifically, the CDP’s guidance on market boundaries is more restrictive and differs from the RE100’s as the CDP considers AIB member countries as the defining market boundary for Europe.

As such to prevent this conflicting guidance between the two initiatives considering that some RE100 members also report to the CDP, the CDP’s market boundary provisions will be adopted. This means that new contracts that do not observe this market boundary will not be accepted by the RE100 however any contracts before 31 December 2021 would continue to be accepted.

The purpose of this proposal is to have standardised harmony between the CDP’s and RE100’s reporting guidance and to ensure that EACs in the European market boundary are EECS compliant.

Market impact

This means that from 31 December 2021 onwards electricity and the associated EACs must be sourced from within the AIB market which will restrict the available markets for members considering that not all European countries are a part of the AIB and to this, the RE100 market boundary before was far larger.

Once this goes into effect the following countries will no longer be part of the RE100’s defined single market for electricity trading in Europe:

The impact of this change will especially be more significant for RE100 members who do not report to the CDP and as such have only been observing the RE100’s larger European market boundary.

According to the RE100 members who operate in non-AIB countries can only use in-country renewable electricity to decarbonize consumption. Based on reporting from 159 members in 2021, 459 GWh of procurement of renewable electricity from 22 RE100 members in 28 European countries will no longer meet the RE100’s technical criteria. However, it is of note that most of these members already report to the CDP and as such already privy to the stricter provisions.

Regarding the UK, the RE100 and CDP have taken note of the legal situation of procurement between the UK and mainland Europe. In the short-to-medium term, it is expected that the UK will cease accepting EU renewable electricity while a mutual recognition is negotiated. The CDP and RE100 have mentioned in their proposal that should the UK become an AIB member, then it would be recognized as part of the market boundary for Europe in their respective guidelines. It is assumed that this will also be the case for any other European country either in the list above or new to come that join the AIB.

For RE100 members that already report to the CDP, this change will not have a major impact however for non CDP members the impact will be significant and a transition and grandfathering plan for the 2023 annual reporting cycle will possibly take place.

This could mean a bullish signal for the market as current and new members’ demand for renewable electricity and Guarantees of Origin within the AIB will increase which would provide upward support to GoO prices. Additionally, for RE100 members that have operations within non-AIB countries, the demand for local renewable energy and local EACs will significantly increase as according to the new rules they will only be allowed to source in-country resources. In certain countries listed like the UK, we expect both the amount of REGO issuances to significantly increase, as the demand will be largely higher but we expect demand to exceed supply and as such the price for UK REGOs to increase.

It is also of note that AIB membership is expected to increase especially with the Energy Community Secretariat being in the midst of launching a project to create an electronic system for GOs in the following 8 Eastern European countries namely:

•Albania,

•Bosnia and Herzegovina,

•Georgia,

•Kosovo,

•North Macedonia,

•Moldova,

•Montenegro

•Ukraine

Therefore the more countries join the AIB the wider the market boundary for procurement by RE100 members.

Accepting physical cross-market procurement when certain conditions are met

The RE100 proposes to amend its note on market boundaries to accept claims of use of renewable electricity sourced across market boundaries when all of the following apply:

• The Member has entered into a PPA with a producer in a different market from their consumption or into a green electricity product with a utility that has such a PPA.
• The cross-market electricity is physically transmitted from the renewable electricity generator connected to the cross-market transmission infrastructure. (there has to be a physical interconnection between the countries)
• The delivery and ownership of the EACs from the generator to the consumer are specified in the PPA. Ideally, credible EAC systems should be used and recognized in both markets.
• The residual mix is calculated in both markets.

Additionally, where single markets exist as defined by the RE100 (e.g Europe and North America), all cross market procurement between countries within those single market boundaries will be accepted. In the case of Europe, this means that supply arrangements for renewable electricity between AIB member states will be accepted but beyond that, the abovementioned points need to be adhered to.

If this proposal is realised this could have a significant impact on the possible volumes of renewable electricity that RE100 members could credibly source which would potentially decrease especially with the physical interconnector requirements.

That said the European Union has been adamant about promoting interconnections with its neighbours with the aim of enhancing the security of supply. This is reflected in the Commission’s recently published REPowerEU plan which plans to “implement many long-pending projects, with a particular focus on cross-border connections to build an integrated energy market that secures supply in a spirit of solidarity.“

As per the REPowerEU plan, an additional EUR 29 billion of investments will be required to power the grid by 2030 to make it fit for increased use and production of electricity. All relevant projects to be funded are included in the fifth PCI list which includes 98 projects in total of which 67 are related to electricity transmission and storage projects. On the priority list is two offshore grid interconnections namely:

• Celtic Interconnector (between France and Ireland)
• North Sea Wind Power Hub (between Denmark, Germany and the Netherlands)

The Commission also stated that it plans on increasing the interconnection capacity between the Iberian Peninsula and France while it has also taken actions in synchronizing the Baltic State’s electricity networks with the continental European network. As more physical interconnections are established between the EU and third neighbouring countries the possible renewable energy volumes that RE100 members could source from becomes wider.

Introducing a 15-year limit on commissioning dates

The RE100 proposes to introduce a 15-year commissioning date limit on the facilities members may claim renewable electricity from. This limit will only apply to purchased electricity and not self-generation.

The reason behind this proposal is that the RE100 would like its technical criteria to further support the procurement of renewable electricity which adds new RES capacities to the grids. According to the proposal “while older renewable generation is still an important resource for the grid, procuring from it does not directly change the grid mix.”

Market impact

According to reports from 159 members in 2021, 15 Members procuring from 31 countries purchased 523 GWh of renewable electricity from facilities commissioned more than 15 years ago which means that these companies would need to change their procurement. Meanwhile, around 19.2 TWh of renewable electricity was procured from facilities commissioned in the last 15 years.

It is of note that the commissioning dates of around 48.3 TWh of purchased renewable electricity were not reported by members thus hindering a more robust impact assessment. According to the RE100, data on commissioning dates are being sought from EAC registries globally for the initiative to better develop its impact assessment.

However one can assume that this would shift the demand profile of members within the initiative to be more focused on procuring renewable energy from younger plants such as wind and solar PV plants as opposed to older hydro technologies. This demand shift could further trickle down into the EAC markets. Also, this criterion for generation from “younger” power plants is one that is already adopted by energy labels such as Naturmade as such this change could result in increased demand for such energy labels. Historically there has been a slightly wider spread between EACs from younger plants versus hydro based certificates however more recently this spread between technologies has become much narrower this could possibly change as more RE100 members change their procurement methods.

Moving forward

Overall the proposed changes by the RE100 while more restrictive are aimed to have the initiative’s guidelines fall in line with the CDP’s and also provide guidelines that allow its members to credibly source renewable energy with a demand that fosters new renewable capacities on the grid.

Membership to the RE100 has been growing year on year with over 23 corporations joining in 2022 thus far and a current total of 372 members thus far. Considering that in 2021, the aggregated electricity consumption of 315 reporting members was over 340TWh, higher than the United Kingdom the sheer demand from these members has and will continue to have a large impact on renewable energy and EACs demand.

16 March 2022  |  The Integrity Council for the Voluntary Carbon Market (the Integrity Council), an independent governance body for the voluntary carbon market, announced today it will launch a definitive set of global threshold standards that will set a global benchmark for carbon credit quality in the third quarter of 2022, following a public consultation opening in May.